AWE Says Oil Project in Indonesia Luring Possible Asian Partners

By James Paton -
Sep 6, 2012

AWE Ltd. (AWE), the Australian explorer
planning a $600 million oil project off Indonesia, said it has
been approached by Asian companies interested in a partnership
to help fund and develop the venture.

The company plans to sell as much as 50 percent of the Ande
Ande Lumut project to a partner late in the first half of 2013,
Bruce Clement, managing director of Sydney-based AWE, said in a
phone interview. An investment decision is targeted by the third
quarter of next year, he said.

AWE is developing shale gas prospects in the Perth Basin of
Western Australia as well as planning expansion in Asia and New
Zealand. The company in January acquired from Malaysia’s Genting
Bhd. (GENT) two Indonesian oil blocks, including Ande Ande Lumut, which
has an estimated 76 million barrels of recoverable oil.

“We’ve had a number of companies approach us and there’s a
lot of interest from regional players, both Australian and
Asian-based companies,” Clement said in an interview yesterday.
“There aren’t that many undeveloped oil fields like this with
an opportunity to get in at a very early stage of development.”

The shares rose 5.2 percent to A$1.52 as of 1:08 p.m. in
Sydney, compared with a 1 percent gain for the S&P/ASX 200
Index. AWE has risen 16 percent this year, while the benchmark
index has increased 6.5 percent.

AWE said in January that it expected a final investment
decision at the end of 2012 on development of Ande Ande Lumut
after agreeing to pay $39 million to buy output-sharing
contracts from Kuala Lumpur-based Genting and assume $100
million in loans and receivables.

Need for Partner

A decision to go ahead with the oil project in the middle
of 2013 or early in the third quarter of next year will allow
time to carry out engineering and design work and get regulatory
approvals, Clement said.

AWE and partner Origin Energy Ltd. (ORG) increased the estimated
cost to upgrade their BassGas project off the coast of
Australia’s Victoria state to A$600 million ($613 million), AWE
said Aug. 27. The companies in July increased the cost estimate
as much as 26 percent to A$550 million to A$580 million.

With AWE’s additional BassGas spending, accelerated
drilling in the U.S. and shale gas campaign, it will probably
need to sell a stake in the Indonesian oil project before
approving the development, James Bullen, a Sydney-based analyst
at Bank of America Corp., said in an Aug. 28 report.

“While the oil price is supportive of a deal, longer term
we still have a number of reservations regarding this project,”
Bullen said.